By Jon Ortiz The Sacramento Bee
Published: Thursday, Jan. 20, 2011 – 12:00 am | Page 3A

Here comes a new plan to cut public pension benefits, and this time current employees aren’t spared.

The California Foundation for Fiscal Responsibility, a Citrus Heights-based group famous for its database of state and local workers with six-figure pensions, wants to reduce existing retirement formulas.

The courts have held that government pension promises can’t be monkeyed with once employees start work. Imposing lower benefits after the fact is like the government illegally seizing your house or breaking a contract. A pension deal is a deal. No do-overs.

That’s why, until now, pension rollbacks have always affected new government hires. Even the most zealous pension cutters, from former Gov. Arnold Schwarzenegger on down, have always assumed current employees’ pension terms were beyond reach.

Dan Pellissier, a former aide to Gov. Arnold Schwarzenegger and a California Foundation point man, says that there’s a way around that. First, the plan:

Say that a 55-year-old state employee, Myra, has 20 years of service. She plans to retire at age 63 and will receive 2.5 percent of the average of her highest three years’ pay (let’s say $50,000). So her annual pension would be $25,000, about $2,100 per month when she retires in 2019.

The foundation’s idea would force every public employee pension plan in California to use tougher standards to figure out the spread between their pension promises to people like Myra and the assets they have to make good on those promises.

Those new standards would undoubtedly increase the estimates of the funds’ “unfunded liability.”

(For reference, CalPERS, with $228.5 billion in assets, said Wednesday that its unfunded liability is now 30 percent to 35 percent. Generally, 20 percent or less is considered healthy for government pensions.)

The foundation’s proposal would freeze Myra’s pension formula. The money she accrued to that point would stay in place, but her benefit going forward would build up at a much lower rate, maybe half. When the fund could cover all its obligations, Myra’s old formula would kick in from then on. Of course, she might retire before that happens.

Pellissier says it will take $2 million to collect enough signatures to get the proposal on the 2012 ballot and another $28 million or so to fight the ad war with unions that will ensue. He thinks the support is out there.

To read entire story, click here.